Advertisement
Advertisement

The Dollar, the EUR and the Loonie in Focus

By:
Bob Mason
Published: Oct 31, 2017, 06:14 UTC

Earlier in the Day: There was plenty of action through the Asian session this morning, with concerns over slower economic activity in China justified

daily market forecast

Earlier in the Day:

There was plenty of action through the Asian session this morning, with concerns over slower economic activity in China justified following the softer October manufacturing and service sector PMI numbers, with China’s manufacturing PMI showing from 52.4 to 51.6, weaker new orders and price pressures weighing.

Other stats through the Asian session included some more disappointing data out of Australia, with private sector credit rising by just 0.3% in September and new home loans slumping 6.1%, supporting the RBA’s concerns over the housing sector and possible adverse impact on labour market conditions and the economy.

With a string of negative stats and the softer numbers out of China, the AUD gave up intraday gains made ahead of the China data, sitting down 0.20% at $0.7673 at the time of writing.

For the Yen, data out of Japan included September household spending, job / applications ratio and prelim industrial production figures, which were released ahead of the BoJ’s monetary policy decision.

The stats were mixed with household spending seeing a boost in September, month-on-month, whilst in decline year-on-year, with industrial production also in decline, though less than forecasted. We saw little response by the Yen ahead of the monetary policy decision, though the BoJ press conference this morning will be of greater influence as the markets look to gauge whether they will stand it alone as other central banks begin to shift on policy in a move towards normalization.

While holding firm on policy, the BoJ’s outlook report revised down its projections on inflation for next year, with core inflation lowered from 1.1% to 0.8%, whilst continuing to pencil in the 2% in the fiscal year 2019/2020, all of which suggests that there’s going to be little movement by the BoJ until 2019, despite improving economic growth.

At the time of writing, the Yen was flat against the Dollar, up just 0.02% at ¥113.16, any easing back in the Yen off the back of the BoJ decision being offset by appetite for the safe have as the Asian equities responded to the weak stats out of China, with the CSI300 seeing red for a second day, down 0.31% at the time of writing, joined by the Hang Seng and Nikkei, down 0.17% and 0.10% respectively.

The Day Ahead:

The stats are on the heavier side through the European session today, with French and Eurozone 1st estimate GDP numbers for the 3rd quarter scheduled for release together with October’s prelim inflation figures out of France, Italy and the Eurozone and there’s French consumer spending and Eurozone unemployment to also consider.

Key drivers will likely be the GDP and inflation figures, with Germany’s softer prelim figures from Monday suggesting that we could see softer inflationary pressures in October. GDP numbers are forecasted to be in line with 2nd quarter stats, so any deviation from forecast will certainly influence.

At the time of writing, the EUR was down 0.18% at $1.163, with direction through the European session hinged on today’s stats.

For the Pound, it’s another quiet day on the economic calendar, leaving the markets to ponder on what’s the likely outcome on Thursday, with little news on Brexit negotiations having hit the wires since last week’s comments on a lack of progress and possibility of a no deal scenario.

The Pound was down just 0.02% at $1.3205 at the time of the report, with any material gains unlikely following Monday’s uptick as uncertainty continues to shroud the Pound.

Across the Pond, we’ve got 3rd quarter employment cost numbers, together with October consumer confidence and Chicago PMI figures out of the U.S to consider, with labour costs and consumer confidence forecasted to be Dollar positive, though as we continue to see in recent sessions, noise from Capitol Hill on tax reforms and who will be the next FED Chair continues to overshadow positive stats out of the U.S. With the FOMC statement in focus tomorrow and the announcement of the next FED Chair on Thursday, it’s certainly up in the air for the Dollar, the neutral position likely to be the FOMC Statement pointing to a data dependent near-term move, with Powell selected as the next FED Chair.

At the time of writing, the Dollar Spot Index was flat at 94.561, recovering from losses earlier in the day, with the markets needing to keep one eye on the ongoing investigations into the U.S administration’s collusions with the Russians during last year’s election campaign. Lead investigator Mueller is peeling away at the onion and there’s no telling how far he can go.

Just in case that’s not enough, GDP numbers out of Canada this afternoon will also be there for the markets to consider, with rising oil prices and a return to growth forecasted in August likely to be positives for the Loonie, though the markets have yet to shake off the weak inflation and retail sales figures that saw the BoC pull back on its hawkish stance and concerns over trade negotiations, with the Loonie flat at the time of the report.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

Did you find this article useful?

Advertisement